West Virginia chemical spill company selling all its chemicals, winding down operations

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By JONATHAN MATTISE, Associated Press

CHARLESTON, W.Va. (AP) — The company at the center of West Virginia's chemical spill that contaminated drinking water for 300,000 people is selling the rest of its chemicals, helping its 51 employees find new jobs and winding down operations.

Saying the company's problems exceed its small size, attorney Mark Freedlander announced Freedom Industries' plans in federal bankruptcy court Friday. Time is running out before the company's March 15 deadline to remove all chemicals from the Charleston spill site and start dismantling the tanks there, per state orders.

The company no longer plans to use up to $3 million in credit, with the possibility of tapping an extra $1 million, which the court had permitted Freedom Industries to borrow to keep running.

"Freedom Industries, plain and simple, can't bear the weight," Freedlander said.

Environmental cleanup costs are expected to be well into the millions of dollars for the company, and legal fees continue to rack up.

In court last month, Freedom Industries President Gary Southern estimated $800,000 in cleanup costs for the first week after the Jan. 9 spill. It expects to pay $1.7 million in various environmental costs in the next month, and the court approved hiring more environmental consultants Friday, according to documents.

The court also cleared the company to hire additional lawyers, adding to $150,000 in legal counsel costs since bankruptcy began, according to court documents.

To keep paying for costly environmental work, Freedom Industries expects to make $990,000 selling off its chemicals and $3.7 million collecting payments in the next month.

Judge Ronald G. Pearson acknowledged Freedom Industries' intent to "shut down large parts, if not all, of the existing facilities" it runs. Pearson also recognized Freedom Industries won't have many assets left for creditors hoping to get compensated.

"Based on what we've heard announced today, there's a serious limit on funding available," Pearson said.

The company has another storage site nearby in Nitro. Last month, the state Department of Environmental Protection said that facility also had shoddy last-resort chemical containment features. The company runs another offshoot named EnergyTech LLC out of Colorado, court documents show.

Freedlander said the company's customers and vendors were informed of the change Friday. Some of the company's employees will be offered jobs at business partners and competitors, he said.

The company's Jan. 9 spill contaminated the water for days.

Dozens of lawsuits against Freedom by businesses and individuals remain on hold during bankruptcy proceedings. Many businesses sued over lost wages and profits because of a water-use ban that shut them down for days.

Freedom Industries' creditors will get the chance to question company representatives under oath at a Tuesday bankruptcy hearing in Charleston. West Virginia American Water, whose water supply was tainted, claims it's the biggest of the group.

Southern, company president, and Chief Financial Officer Terry Cline will be on hand for questioning, Freedlander said. Only lawyers attended Friday's hearing.

Creditors are also starting to look into $6 million Freedom Industries paid to executives and associated companies in the year before filing for bankruptcy, court documents show.

If some of the company's payments to officers and closely tied companies are deemed out of line, they could be clawed back under bankruptcy law. The money would end up in a pool of Freedom Industries assets available to pay back hundreds of creditors.

An official committee of unsecured creditors is already combing through payments for possible impropriety, said Charleston attorney Anthony Majestro, who represents a creditor on the committee.

Majestro said Friday's revelations weren't unexpected.